Want to invest in a company? Don’t ignore its annual reports, they’re a vital part of your research

Julie Brownlee, Fsp Invest, 24 Dec. 2014

Tags: annual reports, investing, investment strategy, company accounts, reading annual reports, invest,

It’s easy to come up with reasons not to read through a company’s annual report. For some companies, especially larger businesses, the report can run into hundreds of pages.

But, a company’s annual reports are crucial to your research. They contain some of the most valuable public information you can get your hands on.

So why should you bother going through them?

Let’s take a closer look…

The value of a company’s annual reports

Many investors, retail and professional alike, tend to turn a blind eye to company annual reports. Yes they can be hard going to make your way through. And yes sometimes they do seem to be more like an advertisement for the company.

But that doesn’t mean you shouldn’t take the time to read them.

There’s information contained in company annual reports that can give you an edge.

Ideally, you want to build a well-rounded, solid picture of what’s going on within a company. This means you want to get your hands on around ten years’ worth of annual reports.

Most companies have these on their websites.

What to look for in annual reports

It’s important to pay attention to what’s happened to a company in the past. Look at its financial performance as well as what management have said.

You can see how management measured up over time with their promises. And by understanding what’s went on within a company in the past can give you an idea of what may lie ahead.

Especially for bigger companies, it’s easy to get your hands on summarised financials. But you need to delve through an annual report looking for extra snippets of information.

Hidden within annual reports are disclosures that can tell you a great deal about how management run a company and whether it has the potential to be a good investment, Phil Oakley in Money Week explains.

So there you have it. Why you shouldn’t ignore a company’s annual reports if you want to invest in it.

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